Key pivot foreseen in macro strategy

China's policymakers are set to take a more proactive approach to macroeconomic policies in the year ahead, aiming to tackle both short-term challenges arising from lackluster demand and structural issues, said economists.

Citing the recently concluded Central Economic Work Conference, they said the country is fine-tuning its macroeconomic strategy, marking a significant shift toward a consumption-driven economy as it prepares for expansionary fiscal and monetary policies in 2025.

"The deficit ratio for 2025 is likely to be the highest on record," said Xiong Yuan, chief economist at Guosheng Securities, anticipating that the government would set the projected deficit-to-GDP ratio for 2025 at 3.5-4 percent or higher in March, up from 3 percent for this year.

The Chinese government started to release the annual projected deficit ratio in 2010, with the highest reading in 2020 at 3.6 percent as COVID-19 hit, according to market tracker Wind Info.

Xiong said next year's quota of special local government bonds is expected to increase to more than 4.5 trillion yuan ($616.5 billion) from a record high of 3.9 trillion yuan this year, in addition to special treasury bonds of over 2 to 3 trillion yuan in 2025, up from 1 trillion yuan for 2024.

Xiong's remarks came as the Central Economic Work Conference held in December pledged to implement more proactive and effective macroeconomic policies, boost domestic demand, drive the integration of sci-tech innovation and industrial innovation, and stabilize the real estate sector and stock markets.

The nation will maintain basic equilibrium in the balance of payments and better synchronize the income growth of households and economic expansion, according to the meeting.

"While promoting industrial sectors was the top task last year, expanding domestic demand is in the top spot this year," said Lu Ting, chief China economist at Nomura.

Lu said that the conference called for more specific measures to support consumption, including increasing basic pension payments, raising fiscal subsidies for basic medical insurance and developing policies to boost fertility.

"Overall, the conference adds support to our relatively optimistic view on fiscal policies in 2025 and our view that Beijing may stick to the 'around 5 percent' GDP growth target in 2025," he said.

According to the conference, policymakers pledged to roll out more initiatives to boost consumption, including greater strides in equipment upgrades and consumer goods trade-in programs.

Looking forward, Lu said policymakers might consider an increase in spending on social security for lower-income households and encouraging childbirth.

"We especially expect policymakers to significantly increase payments to those rural pensioners (55 percent of total pensioners) whose average monthly pension income is only 225 yuan," he said. "They may also increase financial support for families with a second or third child. And they may also waive part of the annual 400 yuan fee on basic medical insurance for low-income individuals."